The trader sold 19,000 put options on the benchmark that would obligate them to buy the index at 2,100 on December 18, 2020, Reuters reported on Monday, citing data from the options-analytics firm Trade Alert. The S&P 500 opened at 2,586.18 on Tuesday.

It could be a winning bet to the tune of about $175 million, as long as the index doesn't drop more than 22% from Monday's closing level of 2,582 by that date.

But if the S&P 500 goes the wrong way, the trader may stand to lose up to half a billion dollars.

For example, if the index were to drop 34% by December 18, 2020, the losses could amount to about $558 million, Reuters said, citing a Refinitiv analysis.

Some in the market said the trade was probably a hedge against another position rather than a speculative bet on a rally in the S&P 500.

"The natural sellers of long-term downside puts are structured products desks at banks, who are hedging exposure they get from retail clients who buy structured notes that have embedded short put options," Benn Eifert, the chief investment officer of QVR Advisors in San Francisco, said on Twitter, according to Reuters.